Summary:
- Deflation in China's economy is causing alarm, with potential negative impacts on business revenues and employment.
- Youth unemployment in China has surged to over 21%, adding to the economic challenges posed by deflation.
- The Chinese government's response to the deflationary situation is currently unclear, causing uncertainty in the market.
- The persistence of deflation in China's economy raises concerns about its long-term economic stability.
The news about China continues to get worse and worse. Be it the real estate market, we're starting to see the faults show up. And to now shadow banking, where we're starting to see the faults, what's going on? Well, to a degree, it's deflation. And you might say, well, lower prices, that's going to spur on demand for Chinese goods, because that's what deflation does. But it's not necessarily so. Lower prices typically drive down business revenues. They lead to lower profits.
They can have less investment in business. And they potentially mean higher unemployment. Youth in China have an unemployment rate over 21%. China can ill afford deflation. The problem is the government seems to talk the talk and doesn't walk the walk. And we are seeing absolutely nothing new. And them doing anything but saying they're looking at the situation. Deflation will persist for a bit.
Deflationary pressures in China's economy are becoming increasingly concerning, with potential consequences for business revenues, employment, and the overall economic outlook. It remains to be seen how the government will address these challenges.